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Identifying Distributions of Selected Stock Returns

N. V. Chandrasekara, C. D. Tilakaratne, M. A. Mammadov

Abstract


Return distribution of stock markets has an immense interest in current financial world. Many approaches have proposed to model the return distribution of stock market index. In this study return distributions of three different stock markets, a highly volatile market (USA market), a stable market (Australian market) and an emerging market (Colombo Stock Exchange) were considered. The study period consist of 5 years daily data from 1st August 2007 to 31st July 2012 of three stock market indices, namely GSPC, AORD and ASPI. The results obtained show that the Scaled t distribution is the most suitable distribution to model the returns of all considered stock markets; while the Normal/Gaussian distribution, Student's t distribution are not suitable for this purposes.

Keywords


Return Distribution, Gaussian Distribution, Scaled t Distribution

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